New Low Observer's  Instablog

New Low Observer
Send Message
As a contributor to the New Low Observer (http://www.newlowobserver.com/about-this-site), we intend to give new insights on a low risk approach to trading in dividend paying stocks for tax deferred accounts. The New Low Observer (http://www.newlowobserver.com/about-this-site) is not intended for... More
My blog:
New Low Observer
  • Apple Meets NLO Upside Target 0 comments
    Aug 20, 2014 11:16 AM | about stocks: AAPL

    On August 19, 2014, Apple (NASDAQ:AAPL) stock price rose as high as $100.66. When Apple was trading at $61.61 on March 9, 2013, we said the following with the accompanying chart:

    "Apple Inc. (AAPL) is at the top of our watch list as it is within 5% of the one year low. In our April 14, 2012 test of the quality of Edson Gould's Speed Resistance lines, Apple fell from $636 [adjusted price of $90.85] to our projected level of $424.15 [adjusted price of $60.59] (found here). Now that the stock has achieved our downside target, we expected that a reaction to the upside is likely."

    (click to enlarge)

    On July 17, 2013, when Apple was trading at $61.47, we re-affirmed our view of the upside potential for Apple with the following commentary:

    "Currently, Apple is demonstrating a basing pattern that if successful, could result in a breakout to the upside. At the current levels, we wouldn't be opposed to buying some shares of Apple with the expectation that the stock could decline an additional -25% to -35%."

    The work of Edson Gould has proven to be astounding when considered in its context. On April 14, 2012, we posted an article titled "Considering the Downside Prospects for Apple". At that time, we were revising the previous estimates of downside risk done on February 5, 2012 (third party source available here).

    What was mentioned on February 5, 2012 is critical to understanding how Edson Gould's downside projections work. At the time, we said:

    "The very first thing that we look for, to determine speed resistance lines, is the most recent peak in the price. Because AAPL is continually making new highs, we only need to use the latest price of $455.68 [post split price of $65.09] as our starting point….As the price of Apple increases, so too does the SRL lines based on the work of Edson Gould."

    This means that as long as the price of the stock increases to a new high the speed resistance lines are expected to increase as well. Only when the stock starts on a declining trend can we expect that the stock price might go to the conservative and extreme downside targets.

    (click to enlarge)

    On April 14, 2012, when Apple was trading at $90.89 (pre-split price of $636.23), we said the following:

    "…we believe that, based on the current speed resistance lines, no one would expect Apple to decline to our conservative downside target of $424 (post split price of $60.57)…"

    The strength of Gould's downside risk estimates is that we didn't even have the peak price of $100.71 set on September 18, 2012 but we were still able to see the conservative downside target of $60.57 achieved. Had we used the peak price, we would have achieved the $67.14 conservative downside target much earlier than the $60.57 level

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: AAPL
Back To New Low Observer's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.